Currently, demand for advanced chipmaking equipment is accelerating exponentially, driven by breakthroughs in semiconductors for artificial intelligence (AI), electric vehicles and high-performance computing. Investors are accordingly turning their attention to companies that supply the critical tools for chip manufacturing. ACM Research ACMR and Applied Materials AMAT stand out as two players distinctly positioned to benefit from this long-term trend.
Applied Materials, with a market cap of more than $134 billion, is a prominent name in materials engineering and is at the forefront of key innovations like gate-all-around transistors and advanced memory. ACM Research, on the other hand, with just $1.37 billion of market capitalization, is expanding fast in wafer cleaning and advanced packaging, particularly in Asia, while scaling globally.
So far in 2025, shares of ACM Research have surged 60.8%, sharply outperforming Applied Materials’ modest 2.1% gain. This reflects ACMR’s strong revenue momentum, growing influence in the Chinese market and expanding global footprint. Its aggressive expansion in high-growth segments like panel-level packaging and vertical furnaces has also captured investor attention. In contrast, AMAT’s slower stock performance reflects headwinds from U.S. export controls affecting its China business, despite its leadership in advanced logic and memory technologies.
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Does this point to a long-term momentum shift? Could ACMR realistically outperform a tech giant like AMAT and position itself as the more compelling investment today? Let’s take a closer look.
Tailwinds Powering ACM Research in 2025
Strategic Positioning in China and High-Margin Performance: ACM Research’s focus on the Chinese semiconductor market, particularly through its localized manufacturing and customer relationships, positions it to benefit from Beijing’s push for self-reliance in chipmaking. With China's aggressive fab expansion plans, ACMR is gaining ground as a preferred domestic supplier of advanced cleaning and wafer processing tools.
The combination of favorable product mix, disciplined cost controls and pricing supports high-margin growth and also increases scalability as customer orders accelerate. ACM Research’s first-quarter 2025 gross margin was 48.2%, above its long-term target range of 42% to 48%.
Strong Balance Sheet With Rising Net Cash: ACMR’s net cash grew to $271 million in the first quarter of 2025, up from $259 million at the end of 2024, even as it ramped up capital investments. Operating cash flow turned positive at $5.3 million compared to a negative $9 million a year earlier, while capital expenditures were trimmed to $17.1 million. With $70 million projected for full-year 2025 capex, ACM Research’s liquidity provides flexibility to fund research and development and navigate macro uncertainty without external financing.
Attractive Long-Term Potential of Applied Materials
AI-Fueled Semiconductor Demand: AMAT continues to benefit from surging investments in leading-edge foundry-logic technologies, driven by the global boom in AI workloads. Its equipment plays a critical role in enabling next-gen chips, particularly in gate-all-around (GAA) and advanced packaging, positioning AMAT as a key enabler in the AI semiconductor ecosystem. In the second quarter of fiscal 2025, AMAT reported robust revenue growth in its Semiconductor Systems segment, as leading-edge demand more than offset softness in legacy nodes. The company expects this momentum to accelerate in the third quarter.
Resilient Margins and Strong Shareholder Returns: In the second quarter of fiscal 2025, Applied Materials delivered adjusted EPS of $2.39, exceeding the Zacks Consensus Estimate by 3.5%. Its gross margin was 49.2%, the highest in over two decades. This was driven by strong operational efficiency and a favorable product mix.
This earnings strength was complemented by a robust capital return strategy. The company returned $2 billion to shareholders through dividends and buybacks and has $15.9 billion in remaining repurchase authorization. A recent 15% dividend increase further underscores AMAT’s long-term profitability outlook.
Trump Tariffs Cast Shadow Over Semiconductor Space Impacting AMAT & ACMR
The Trump administration's sweeping 25% semiconductor tariffs have major implications for equipment providers like Applied Materials and ACM Research. Both companies are deeply dependent on international supply chains and are expected to face significant cost pressure. For AMAT, whose customer base spans Asia and includes key players like Taiwan Semiconductor TSM and Samsung, the tariffs threaten to inflate costs, delay shipments and disrupt service agreements. Similarly, ACMR, with significant exposure to the Chinese semiconductor market, faces heightened pressure as the tariffs complicate export procedures and raise the risk of retaliatory measures from Beijing.
ACMR More Attractively Valued Than AMAT
ACM Research is trading at a forward 12-month price-to-earnings of 17.09X, significantly below its 5-year median of 21.70X. Meanwhile, Applied Materials is presently trading at a forward 12-month price-to-sales of 17.09X, almost aligning with its 5-year median of 17.80X.
This suggests that ACMR remains attractively valued when compared with AMAT, as well as its own historical average.
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Price Target
Based on short-term price targets by 29 analysts, Applied Materials' average price target of $199.33 implies a 20.1% upside from the last close.
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Based on short-term price targets by seven analysts, the average price target for ACM Research of $34.43 implies a 45.45% upside from the last close.
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ACMR or AMAT: Which Stock Appears Better Poised?
ACMR is gaining momentum with a 60.8% year-to-date stock surge, strong margins and growing relevance in China's chip self-reliance drive. Meanwhile, AMAT benefits from AI-driven demand and robust shareholder returns. However, its slower stock growth and expensive valuation limit near-term upside. In fact, macro risks, including shipment volatility and U.S.-China tensions, temper the outlook of both these Zacks Rank #3 (Hold) stocks. Investors may find it wise to hold their positions rather than making new aggressive moves under current market uncertainties. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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